Montenegro: New Companies Act

The new Montenegrin Companies Act entered into force on 11 July 2020, introducing numerous novelties in the regulation of companies. Some of the new provisions have not been sufficiently developed to be operational and will have to be supplemented by further legislation or interpretation. Existing corporates will have to amend their memorandums of association and register corporate changes to comply with the new legislation within next 9 or 18 months, depending on the type of the company.

Corporate governance

Limited liability companies

Ordinary limited liability companies now have shareholders’ assembly as a mandatory corporate body, in addition to executive director. As an exception, single-shareholder limited liability company does not have to have shareholders’ assembly. The shareholders remain free to add additional corporate bodies in the company’s memorandum of association, as they see fit.

“Public limited liability companies”, i.e. companies that issue securities or other financial instruments admitted to trading on a regulated market, as well as limited liability companies that are considered “large enterprises’ within the meaning of the accounting regulations, must have the same corporate structure as  joint stock-companies (see below).

Joint-stock companies

Joint-stock companies must choose between one-tier and two-tier management structure. One-tier structure means board of directors as a collective body and executive director as a single-person corporate body. Two-tier system means management board and supervisory board.

Public companies (i.e. companies that have issued securities or other financial instruments admitted to trading on a regulated market) that opt for one-tier management structure must have at least five members of the board of directors, while board of directors of private companies must have at least three members. In case of two-tier structure, supervisory board of a public company must have at least five members while supervisory board of a private company must have at least three members. In one tier system, at least one third (in private companies) and one fifth (in public companies) of the members of the board of directors must be independent. In two-tier system, at least one fifth of the members of supervisory board of a public company must be independent (one third in private companies).

Deadlines for adjustment to the new rules

Joint stock companies, public limited liability companies and limited liability companies classified as large enterprises are obliged to adjust their corporate organization to the new legislation and register the changes by l 11 April 2021. Other companies are obliged to do so until 11 January 2022. The companies that miss the deadline may be liquidated.

New flexibility of the shareholders’ structure in limited liability companies

The shareholders’ stakes in the share capital of a limited liability company no longer need to be proportional to their contributions. It is now specifically provided that the shareholders may agree in the memorandum of association that their stakes, and thus the rights associated to them, do not depend on their contributions.

Prohibition of repayment of capital contributions

The legislation explicitly prohibits return of share capital contributions to shareholders, except in case of acquisition by the company of treasury shares or when this is otherwise specifically permitted, such as in the case of capital reduction.

Withdrawal and exclusion of shareholder in limited liability company

The new legislation introduces provisions on withdrawal and exclusion of shareholders from the company. A shareholder may unilaterally withdraw from the company at any time. Ordinarily, the shareholder is not entitled to any compensation for his share in that case. Exceptionally, the withdrawing shareholder may seek compensation for the share if the reason for the withdrawal is in that other shareholders are acting to the detriment of the withdrawing shareholder. In that case, if the company does not accept the withdrawing shareholder’s proposal for the compensation, the withdrawing shareholder may ask the court to declare that the withdrawal is justified, to determine the compensation amount, and order the company to pay it within a deadline of up to 18 months.

Any shareholder may file a lawsuit for exclusion of another shareholder who has, intentionally or with gross negligence, caused damage to the company or another shareholder, or who has significantly aggravated the operations of the company. The excluded shareholder is entitled to a compensation equal to the proportional part of the net value of the company’s assets as of the date of the lawsuit. It is not specified how the value of the company assets is to be determined

Persons with special duties to the company

The new legislation extends the category of persons with special duties to the company and extends the scope of those duties. Persons with special duties are: partners in general partnerships, general partners in limited partnerships, shareholders who, individually or with other persons acting in concert,   hold more than 20% shares or otherwise exert a decisive influence in the company, executive directors, members of the board of directors, members of the supervisory board, external auditors and liquidators. The duties towards the company are: the duty of care (this duty is limited to directors, members of the board of directors, supervisory board, external auditors, and liquidators), the duty to report personal interest in the company’s transactions, duty to avoid conflict of interest, duty to protect company’s business secrets, and the non-compete obligation.

Judicial liquidation of companies

Aside from standard voluntary liquidation, the legislation introduces the possibility for judicial liquidation in certain cases.

Judicial liquidation is carried out at the request of a person able to prove legal interest or ex officio (it is not specified by whom): (i) if the company established for a fixed period of time neither registers the continuation of its operations nor initiates voluntary liquidation within 30 days from the expiration of the period for which it was established; (ii) if the share capital of the company falls below the minimum capital requirement, and the company within further six months does not increase its share capital, change its form into a form satisfying its existing capital conditions, or starts voluntary liquidation; (iii) if the establishment of the company has been annulled by a final judgment; (iv) if the company, after being fined for a penal violation of the law, does not cure the established violation which jeopardizes the interests of its shareholders, creditors, employees or members of the corporate  bodies who are not responsible for the violation; and (v) in other cases as may be provided by the law.

Judicial liquidation is carried out in accordance with the rules of bankruptcy proceedings excluding the rules on reorganization.

Preclusive deadlines for lawsuits based on piercing of corporate veil

A company’s creditor may sue the company’s shareholder for the company’s debt within six months from becoming aware of the abuse representing the basis for the piercing or from the date when the claim against the company became due, whichever is later, but in any case not after three years from the occurrence of the abuse giving rise to the piercing.


The notion of procura is another novelty. Procurator is a natural person authorized by the company (authorization must be notarized) to enter into legal transactions on behalf of the company. Procurator must be registered as such with the Central Registry of Commercial Entities. Procura is not transferable.

Resignation of executive director and the notion of acting director

Under the previous legislation, the Central Registry of Commercial Entities was refusing to deregister an executive director who had resigned from the office unless a simultaneous application for registration of the replacement was filed. The new legislation now explicitly permits that the resigning director be deleted from the register regardless of whether the position is refilled. The company is obliged to appoint a new executive director within 60 days from the deregistration of the previous one. In the meantime, it can appoint an acting director.

E-mail address is mandatory

The newly established companies must register an e-mail address with the Central Registry of Commercial Entities. No deadline is prescribed for registration of e-mail address of the existing companies.